The company has put together secured senior financing of up to $325M from holders of the surplus notes of MBIA Insurance Corp.

MBIA (NYSE:MBI) bull Mark Palmer from BTIG has held for some time that MBI equity would not be directly impacted had the company not been able to satisfy the Zohar II maturity, but nevertheless it's good news this morning as he has no doubt it's been an overhang.

Q3 combined operating income of $5M or $0.04 per share vs. $24M and $0.15 one year ago.

Adjusted book value per share of $32.39 vs. $29.69 at start of year, mostly thanks to the buyback of 16.6M shares at prices far below book (though no shares bought back in Q3). Today's close was $7.79.

U.S. Public Finance Insurance operating income of $24M down from $48M a year ago, mostly thanks to a $35M adverse variance in losses and loss adjustment expenses (Puerto Rico). Net premiums earned of $60M fell 12% Y/Y. National Public Finance insured $339M of new business gross par exposure in Q3 vs. $129M a year ago. Net investment income of $29M flat Y/Y.

The sale of MBIA UK to Assured (NYSE:AGO) is part of MBIA's (NYSE:MBI) plan to address the maturity of the Zohar II Notes on Jan. 20, 2017, which had about $772M of gross par outstanding as of the end of Q2.

MBIA does not currently expect that the Zohar II CLO will have sufficient cash flow to repay all of the Zohar II notes at maturity. The deal is hoped to close in early January, but there's no assurance it will or that MBIA's strategies will be successful.

Cloture was invoked by a wider-than-expected 68-32 margin, putting the Puerto Rico debt relief bill on track to pass before the end of the week, when the Commonwealth's government says it will default on its most senior debt payments.

The White House is a big backer of the bill, and the President is expected to sign quickly once the full Senate passes. The law doesn't authorize or prevent a default, but will provide Puerto Rico with protection from creditor litigation (i.e. hedge funds "suing the Commonwealth to death") while it works out a restructuring.

It's good news for the bond insurers MBIA (MBI+2.9%), Assured Guaranty (AGO+3.9%), and Ambac (AMBC+5.3%), says BTIG's Mark Palmer, as it avoids what could have been a chaotic debt restructuring.

While shares of MBIA (NYSE:MBI) and Assured Guaranty (NYSE:AGO) were hit this week thanks to a breakdown in talks between Puerto Rico and its creditors. The breakdown shouldn't be surprising, writes Mark Palmer at BTIG, but is instead part of the normal back and forth between negotiating parties.

More notable, says Palmer, is the Commonwealth's latest proposal to certain bondholders which he believes gives investors an idea of what a worst-case scenario will look like.

Palmer's previous estimate of MBI's loss per share on its Puerto Rico exposure of $5.14 is cut to $4.26. For AGO, it was $6.09, but has been cut to $5.19.

The law would have allowed the Commonwealth to restructure the debt of its utility companies to help deal with the financial crisis there. Siding with bondholders, the Supreme Court by a 5-2 margin ruled the law unconstitutional.

The ruling puts the ball in Congress' court to fashion a bailout.

MBIA (MBI+0.8%) has nosed higher on the news. Assured Guaranty (NYSE:AGO) is flat.

Adjusted book value was boosted by nearly 7% Q/Q to $31.74 thanks to a fast pace of buybacks, and the stock now trades for less than 25% of ABV.

In a worst-case scenario for Puerto Rico, according to Palmer's calculations, MBIA could lose $7.42 per share of ABV to $24.32. Even a 0.5x multiple on that results in a stock price of $12.16, or more than 60% above the current level.

Adjusted book value per share of $31.74 up from $29.69 three months earlier, mostly thanks to 15M of buybacks at an average price of $6.30 each..

U.S. Public Finance operating income of $37M vs. $56M a year ago. Total net premiums earned of $58M down from $85M. $158M of gross par amount of new insurance written vs. $38M. Net investment income of $31M up 7%.